The past and future of manufacturing: observations 1
I have been researching the trends in manufacturing, and its sub-sectors, for the op ed published in The Telegraph, and thought I’d share some of the interesting findings in #dataisbeautiful #charticle format.
I find two aspects of this data for 2018 quite striking. First, relative to Europe’s manufacturing giants, such as Germany, the UK’s manufacturing sector is still sizeable (see left hand panel of chart). [Note: I’m intentionally focusing on hours worked, but you’d get a fairly similar, but not identical, picture if you looked at output in terms of gross value added. I will return to this theme later.] As a share of the UK’s total hours worked, manufacturing is only about 10%, but putting it into this OECD context is quite useful.
The second aspect, though, which I mention in the Telegraph op ed, is the decline in employment and/or hours worked in manufacturing in developed economies, pretty much across the board. In this dataset, the only countries that grew manufacturing employment between 1998 and 2018 were Poland and Israel. [I will delve further into this in the future, too.] The UK’s decline was sharp — at nearly -40% — but many other countries posted reductions in manufacturing employment of around 30%. This order of magnitude is true for the oft-lauded Scandinavian countries, too, whose success (at least on some metrics) must therefore be due to something else.
Do I think manufacturing in developed countries has a future? Absolutely. Do I think it will generate a lot of jobs? No, not really. Its value will manifest itself in other ways, through better goods and services for consumers and other businesses, through spillover benefits to supply chains and local communities, through tax revenues for governments, and through dividends and value creation for shareholders, including pension funds.